PROBLEMS AND CRITICAL THINKING EXERCISES 1. Rodman Company has the following bal

Question

PROBLEMS AND CRITICAL THINKING EXERCISES 1. Rodman Company has the following balances as of December 31, 20x7 Materials inventory Work in process inventory Finished goods inventory Manufacturing overhead (after allocation) Cost of goods sold $ 15,000 dr. 36, 200 dr. 50, 100 dr. 3,500 dr. 74,500 dr Additional information is as follows: Cost of materials purchased during 20X7 Cost of direct materials requisitioned in 20x7 Cost of indirect materials requisitioned in 20X7 Cost of goods completed in 20x7 Manufacturing overhead allocated $ 41, 000 47,000 8,000 105, 000 (120% of direct labor) 51,000 Required: a) January 1, 20x7, materials inventory b) January 1, 20x7, work in process inventory c) January 1, 20X7, finished goods inventory d) Actual manufacturing overhead incurred

Explanation / Answer

Answer a.

Materials Inventory, January 1 = Materials Inventory, December 31 + Cost of Direct Materials requisitioned + Cost of Indirect Materials requisitioned - Cost of Materials purchased
Materials Inventory, January 1 = $15,000 + $47,000 + $8,000 - $41,000
Materials Inventory, January 1 = $29,000

Answer b.

Manufacturing Overhead allocated = 120% * Direct Labor
$51,000 = 120% * Direct Labor
Direct Labor = $42,500

Work in Process Inventory, January 1 = Work in Process Inventory, December 31 + Cost of Goods Manufactured - Cost of Direct Materials requisitioned - Manufacturing Overhead allocated - Direct Labor
Work in Process Inventory, January 1 = $36,200 + $105,000 - $47,000 - $51,000 - $42,500
Work in Process Inventory, January 1 = $700

Answer c.

Finished Goods Inventory, January 1 = Finished Goods Inventory, December 31 + Cost of Goods Sold - Cost of Goods Manufactured
Finished Goods Inventory, January 1 = $50,100 + $74,500 - $105,000
Finished Goods Inventory, January 1 = $19,600

Answer d.

Actual Manufacturing Overhead = Manufacturing Overhead allocated + Manufacturing Overhead debit balance
Actual Manufacturing Overhead = $51,000 + $3,500
Actual Manufacturing Overhead = $54,500

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